Sir Mervyn King attacks EU financial transaction tax

Sir Mervyn King has launched an astonishing attack on Europe’s controversial
financial transaction tax, claiming that there is “enormous scepticism”
about the levy even among the countries signed up to it.

The Governor of the Bank of England said he could “not find anyone within the central banking community who thinks it is a good idea”. He added that resistance came not only from central bankers but also from politicians in participating countries.

Earlier this year, a splinter group of 11 European Union nations, but not the UK, decided to press ahead with the proposal, which would see a 0.1pc levy charged on equity and debt transactions and a 0.01pc tax on derivatives. Germany, France, Italy and Spain have agreed to the plan, which the European Commission expects will raise €35bn (£29.4bn) a year and hopes will be in force by 2014.

The UK has openly rejected an FTT, warning that it threatened to damage the City of London and growth across Europe by encouraging traders to move to Hong Kong or New York. Britain is also fighting an extra-territoriality clause that would see the levy imposed on any euro-denominated transaction, even in countries that are not signed up to the FTT.

“I can understand why some politicians feel reluctant to express their true scepticism about this idea in public, but I can assure you I do hear an enormous scepticism even from quarters which are alleged to be behind it,” Sir Mervyn said in his final Inflation Report press conference.

He hinted that Europe would use delaying tactics to kick the FTT into the long grass. “I think you will see over the next month some considerable debate which will end up with more reflection being taken before designing anything in this area,” he said. “I don’t think we are remotely close to getting a clear view on any of this.”

Earlier this month, German finance minister Wolfgang Schäuble played down the significance of the tax and suggested it could be years before one is adopted. “We are just beginning this discussion. It is not a major concern to be very frank,” he said. “This year, next year ... it’s not (a) major problem.”